Is this ASX 200 share ESG-challenged or a recession-proof buy?

Aristocrat Leisure Limited (ASX: ALL) is an S&P/ASX 200 Index (ASX: XJO) share that might divide some opinions.

Ethical, social and corporate governance (ESG) investing is certainly one of the most potent trends to emerge in the investing world in recent years.

Investors are ever more conscious of where their hard-earned money is going and what it is funding. And increasingly, investors want to invest their capital (inside super or out) into companies that align with their values.

And for many investors, this doesn’t include gaming companies like Aristocrat, given the company is a well-known manufacturer of poker machines.

But many other investors love the types of companies that dwell on the fringes of the ESG arena. Gambling, drinking and smoking, for example, may be considered morally grey industries by some.

But they also provide what other investors might describe as a ‘recession-proof’ earnings base, considering the ‘fondness’ many customers have for them.

So is Aristocrat Leisure a morally questionable company, or could it be a recession-proof buy today (or both?

Well, loath of being a moral arbiter in this arena, let’s outsource this question to Ben Clark of TMS Capital, and Henry Jennings from Marcus Today. Both recently sat down for an interview at Livewire.

A guilty buy today?

When asked if Aristocrat was a buy right now, both experts agreed. Here’s what Jennings had to say first up:

Apart from the moral aspect of pokie machines which I struggle with, I think Aristocrat is a buy. At the end of the day, no matter what happens in the economy, people like to hope and they like to put money into pokie machines and online gaming because it’s a distraction.

A distraction from everyday woes and there’s that hope that you’re going to hit the jackpot. And even in a recessionary environment, it is relatively safer than some of the other stocks that are out there.

Clark agreed, here’s what he added on the matter:

I’m going to go a buy as well. Look, I think it’s interesting because the ‘crown jewel’ is now the US land-based business. And that continues to trade very strong despite all these concerns about a recession going to what Henry’s talking about there.

A very strong result in May, well ahead of every analyst’s expectations. There’s earnings momentum. The big issue for this company is it’s got too much cash on its balance sheet. It did a big raising to fund an acquisition that never played out, but to me, that’s a pretty good problem to have. It’s not the biggest problem. I’ll go buy.

So that’s fairly unequivocal for Aristocrat. Of course, if gaming and gambling are anathemas to any investor, no one is forcing anyone to buy Aristocrat. But for other investors that perhaps do not consider ESG considerations important or effective, these opinions might be worth considering.

Aristocrat share price snapshot

The Aristocrat Leisure share price has had a pleasing end to the week so far this Friday. The ASX 200 gaming company has gained 0.52% at the time of writing to $36.44 a share.

At this share price, Aristocrat Leisure has a market capitalisation of $24.23 billion, with a dividend yield of 1.43%.

The post Is this ASX 200 share ESG-challenged or a recession-proof buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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